Extracting the surplus from being in prison

by on June 27, 2014 at 7:13 am in Economics, Law, Political Science | Permalink

Inside the razor wire on Eagle Crest Way, in rural Clallam Bay, Wash., telephone calls start at $3.15. Emails out, beyond the security fence, run 33 cents. Money transfers in, to what pass for bank accounts, cost $4.95.

Within that perimeter lies the Clallam Bay Corrections Center, a state prison — and an attractive business opportunity. One private company, JPay, has a grip on Internet and financial services. Another, Global Tel-Link, controls the phones.

The problem of course is unfettered monopoly, not the private companies per se, but private companies are often more efficient at exploiting the gains from potential monopoly power.  Still, government is in on the act too:

In Baldwin County, Ala., for instance, the sheriff’s department collects 84 percent of the gross revenue from calls at the county jail.

The story is here, and for the pointer I thank Henry Farrell.

Bill June 27, 2014 at 7:38 am

It’s not just in prison, but also in the perimeter.

My wife’s foster brother visited periodically a a friend in a state prison What he noticed was that as he got closer to the prison ATM fees significantly increased.

So Much for Subtlety June 27, 2014 at 8:43 am

Gee, Bill, can you think of any reason why ATMs might be more expensive the closer they get to large collections of criminals?

I can’t. Must be discrimination or something.

Bill June 27, 2014 at 8:50 am

That’s possible there would be higher costs. But, the prison is in a typical rural community, with a bunch of 7-11s and gas stations. But, I would also assume that ATMs have pretty good security, and that identification mechanisms are not deficient. Anyway, I think it would be an interesting study for anyone out there who wants to do some investigative research.

Bill June 27, 2014 at 8:53 am

By the way, all the ATMs were from just one bank.

So Much for Subtlety June 27, 2014 at 9:01 am

So if they are rural, they will be more expensive anyway. Costs more to install and service. If they are isolated they will need extra security.

On top of which if you have a large number of criminals near by, with larger numbers of relatives coming to visit, you will need even more security. Which costs. And you will be ripped off a lot. As well as some of your customers being mugged and suing. All of which costs.

But it would be an interesting study.

Mitch Berkson June 27, 2014 at 9:54 am

This study wouldn’t be too onerous. You could just compare the prices of a variety of goods in the same stores as the ATMs versus the stores’ distances from the prisons.

Li Zhi June 27, 2014 at 10:16 am

Sarcasm is rarely effective way to communicate. More often just allows venting and display of arrogance and disrespect. SMFS – are you trying to imply that crime-rates are high(er) in communities with prisons? That is risible. (of course, prison guards tend to be poorly paid, and poorly educated and therefore a ‘high risk’ in terms of crime.) What a dumb comment.

Finch June 27, 2014 at 10:21 am

” are you trying to imply that crime-rates are high(er) in communities with prisons?”

Aren’t they? I mean that’s certainly their reputation. It’s easy to think of mechanisms for this, but it’s an empirical question and someone has probably studied it…

Spencer June 27, 2014 at 2:09 pm

Why would you think that.?

Prison are heavily located in rural regions while crime is more heavily skewed to urban areas.

Finch June 27, 2014 at 2:54 pm

I don’t mean to strongly argue the point – I’m honestly not sure whether they are. But I think it’s their reputation. For example, it’s one of their effects in SimCity. :)

Some causal reasons might be that prison visitors are themselves likely to commit crimes. Prison workers are maybe more likely to commit crimes. Prisoners eventually are released or have furloughs. There are still escapes.

Correlative reasons might be that towns with worse finances are more likely to allow the construction of prisons. So are places with higher crime.

I’m really not pounding my fist on the table arguing for this, but I don’t think it can be laughed off like Li tried to do.

So Much for Subtlety June 27, 2014 at 6:32 pm

So while I take your point about sarcasm, Li, I am enjoying your belief that open insult is an improvement. Way to go. Oh wait, that sounds a little sarcastic. I take it back. You donkey’s hinney.

Crime rates don’t need to be higher in communities with prisons. As such. They just need a lot of criminals going through those communities. That is not risible. It is highly likely that regular visits by the friends and relatives of criminals – who themselves are much more likely to be criminals – as well as criminals being released, will result in higher crime rates. That is not risible.

chuck martel June 27, 2014 at 7:49 am

The vaunted US system of justice not only incarcerates more than anyone else in the world, it also punishes innocent relatives and friends in the name of making risk-free money for guys like Ronald Hodge. I hope he chokes on a scallop.

So Much for Subtlety June 27, 2014 at 8:42 am

Sooooo ….. you think the relatives would be better off if there was no contact with the prisoners at all? Because while they might suffer, at least they are not exploited?

chuck martel June 27, 2014 at 10:58 am

Discouragement of the basic and extended family has been a conscious effort of the nation/state from the beginning. The nation/state demands allegiance and wishes to share it with no other, not the family, clan, tribe, or any other non-governmental entity. Isolating prisoners from their families is just one more technique, as is child support, use of informants, subsidized child care, social security, etc. Ideally, the individual is to have no other meaningful relationships than bureaucratic ones. The exceptions are phony ones, sports teams, primarily. While a real tribe, like the Nez Perce, has been marginalized, a bogus one, the Washington Redskins fans, have become important.

mucgoo June 27, 2014 at 12:38 pm

Politicians parading their children in a show of family values? British monarchy? Marriage tax breaks? All big headline stuff which is very pro family.

So Much for Subtlety June 27, 2014 at 6:26 pm

But the US prison system does not isolate prisoners from their families. It just makes it a lot more expensive. While I don’t disagree with anything else you have said, I also don’t think it is relevant. The US is not some Orwellian nightmare. Its sins are cheap and petty – but small.

Brandon June 27, 2014 at 12:16 pm

The only possibilities being price-gouging or no contact whatsoever, of course.

So Much for Subtlety June 27, 2014 at 6:28 pm

Chuck compared the US to the rest of the world. Where prisoners are lucky if they get a single letter a year. They certainly do not get regular phone calls, at whatever price, somewhere like China.

So no it is not the only option. But then again the US is towards the lower end of the developed world in helping prisoners keep in touch with the outside world. Worse than Norway I am sure. But that still means it is better than roughly 140 countries on the planet.

Michael June 27, 2014 at 10:34 am

Hmm, no. So, the point of keeping these goods artificially high in prison is that it is an intrinsic part of the punishment– we don’t want folks running their criminal enterprises easily while receiving three hots and a cot from Uncle Sam.

That somebody gets to capture these surpluses is inevitable, it is just a matter of how we figure out who.

Liam June 27, 2014 at 11:45 am

Criminall enterprise? Do you actually think everyone we lock up is some underworld kingpin?

But you’re right – the best way to rehabilitate someone is to place higher barriers to their support structures and education.

Michael June 27, 2014 at 4:18 pm

Dude, you don’t have to be Avon Barksdale to engage in criminal activity over a cellphone.

Gee, Liam wins the award for strawman of the day.

The whole point of prison is that it is punishment, and it removes a person from society. I don’t see what is so difficult to understand here.

Zephyrus June 27, 2014 at 4:03 pm

Yes, underworld drug lords are totally going to be deterred by charging three dollars per minute on a telephone call. People being cut off from their families is just an unfortunate side effect of pursuing the greatest good for the greatest number.

Michael June 27, 2014 at 4:09 pm

If you don’t understand the impact that prices can have on the margin, then I wonder why you’re on a site called “Marginal Revolution”.

dan1111 June 28, 2014 at 1:47 am

I think Zephyrus has the better of this one. Yes, high prices offer some amount of deterrent to everyone. But they are likely to be much more of a deterrent to contacting family than engaging in criminal enterprise, since there is income associated with the latter. Thus, prices are really a poor way to prevent criminal activity.

If you look at prison phone service, you will find a wide variety of pricing for phone calls, from very cheap to very expensive. This suggests that prices are set arbitrarily, based on whether there is competition and how prison phone contracts are awarded in different jurisdictions–not as an intentional policy to prevent crime.

The way prisons actually address criminal activity is by monitoring phone calls. The cost of doing this is sometimes passed on to the inmates, which is one reason for higher prices (though many jurisdictions are able to do it while still having calls be fairly cheap). Also, monitoring email may be the reason for the cost of sending email.

Divine June 27, 2014 at 7:54 am

Captive customers!

Becky Hargrove June 27, 2014 at 8:48 am

So long as skill sets have such low liquidity levels, this is the rationale people use, so as not to perform even worse atrocities.

The Other Jim June 27, 2014 at 9:02 am

Did he just dismiss the Government’s reliance on being a monopoly itself to rip people off by using the word “Still”?

And did he offhandedly state that the Government was “in on the act” …. by seizing 84% of the cash?

I’m pretty sure he just did those things.

dan1111 June 28, 2014 at 1:50 am

Not sure of your point here. It appears that the private sector is reaping most of the benefit of monopoly in this case overall.

Li Zhi June 27, 2014 at 10:40 am

This ties neatly in to the recent articles about how the criminal justice system charge defendants for using the courts. Not those found guilty, but defendants. Used to be we ALL were presumed innocent.
If we can’t/won’t pay for our criminal justice system, we shouldn’t HAVE it.
I wonder if that is the core flaw in democracy – that people will place more trust in the government (which is generally more incompetent and less able to deal with the subtlities of context) than in their neighbors and community? A lot of the comments here reflect that view. One should be careful what one wishes for.

dan1111 June 28, 2014 at 1:49 am

Personally, I think this practice should be challenged as unconstitutional.

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